What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-10 · 96 added, 82 removed, 322 unchanged (36% of the section changed)

3 unchanged sentences

(Dollars in thousands, except par value)

June 30, 2021

September 30, 2021

December 31, 2020

2 unchanged sentences

Marketable securities

Receivables, net of allowance for doubtful accounts of $ 506

Receivables, net of allowance for doubtful accounts of $ 505 and $ 506 , respectively

Inventories, net

19 unchanged sentences

Shareholders' equity:

Common stock, par value $ 0.001 , 50,000,000 shares authorized, 18,779,781 shares issued and outstanding

Common stock, par value $ 0.001 , 50,000,000 shares authorized, 22,402,970 and 18,775,773 shares issued and outstanding, respectively

Additional paid-in capital

8 unchanged sentences

(Dollars in thousands, except per share amounts)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Cost of goods sold

6 unchanged sentences

Interest expense

Other income (expense), net

Other income, net

Loss before income taxes

12 unchanged sentences

(Dollars in thousands, except per share amounts)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expense

Amortization of right-of-use assets

Stock-based compensation expense

Share-based compensation expense

Provision for doubtful accounts, net

4 unchanged sentences

Accrued liabilities

Income taxes payable

Income taxes receivable

Deferred product revenue

1 unchanged sentence

Other long-term lia bilities

Net cash provided by operating activities

Net cash used in operating activities

Cash flows from investing activities:

6 unchanged sentences

Cash flows from financing activities:

Net proceeds from issuance of common stock and warrants

Proceeds from issuance of short-term notes

Net proceeds from Paycheck Protection Program loan

1 unchanged sentence

Principal payments of long-term debt

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

5 unchanged sentences

The following is a summary of supplemental cash flow activities:

Six months ended June 30,

Nine months ended September 30,

Cash paid for income taxes

2 unchanged sentences

CLEARONE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUIDTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

9 unchanged sentences

Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations.

The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of June 30, 2021 and December 31, 2020, the results of operations for the three and six months ended June 30, 2021 and 2020, and the cash flows for the six months ended June 30, 2021 and 2020.

The results of operations for the three and six months ended June 30, 2021 and 2020 are not necessarily indicative of the results for a full-year period.

The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of September 30, 2021 and December 31, 2020, the results of operations for the three and nine months ended September 30, 2021 and 2020, and the cash flows for the nine months ended September 30, 2021 and 2020.

The results of operations for the three and nine months ended September 30, 2021 and 2020 are not necessarily indicative of the results for a full-year period.

These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.

1 unchanged sentence

The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2020.

There have been no changes to these policies during the six months ended June 30, 2021 that are of significance or potential significance to the Company.

There have been no changes to these policies during the nine months ended September 30, 2021 that are of significance or potential significance to the Company.

Recent accounting pronouncements:

The Company has determined that recently issued accounting standards will not have a material impact on its consolidated financial position, results of operations or cash flows.

As of June 30, 2021 , our cash and cash equivalents were approximately $ 2,088 compared to $ 3,803 as of December 31, 2020.

Our working capital was $ 17,567 as of June 30, 2021 .

Net cash provided by operating activities was $ 985 for the six months ended June 30, 2021, an increase of $ 872 from $ 113 of cash provided by operating activities in the six months ended June 30, 2021.

As of September 30, 2021 , our cash and cash equivalents were approximately $ 9,161 compared to $ 3,803 as of December 31, 2020.

Our working capital was $ 23,739 as of September 30, 2021 .

Net cash used in operating activities was $ 1,477 for the nine months ended September 30, 2021, an increase of $ 1,168 from $ 309 of cash used in activities in the nine months ended September 30, 2021.

We are currently pursuing all available legal remedies to defend our strategic patents from infringement.

We have already spent approximately $ 23,559 from 2016 through June 30, 2021 towards this litigation and may be required to spend more to continue our legal defense.

We have already spent approximately $ 25,668 from 2016 through September 30, 2021 towards this litigation and may be required to spend more to continue our legal defense.

We believe the decision by the U.S.

6 unchanged sentences

Legal Proceedings in this quarterly report.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

We have been actively engaged in preserving cash by suspending our dividend program and allowing our share repurchase program to expire in 2018 and implementing company-wide cost reduction measures.

We have also raised additional capital in 2019 by issuing senior convertible notes and in 2020 by borrowing through the CARES Act Paycheck Protection Program and issuing common stock and warrants.

In addition, we expect to generate additional cash as our inventory levels are brought down to historical levels.

We have also raised additional capital in 2019 by issuing senior convertible notes, in 2020 by borrowing through the CARES Act Paycheck Protection Program and issuing common stock and warrants and in 2021 by issuing short term notes and issuing common stock and warrants.

In addition, we have been generating additional cash as our inventory levels are brought down to historical levels.

We also believe that the measures taken by us will yield higher revenues in the future.

We believe, although there can be no assurance, that all of these measures and effective management of working capital will provide the liquidity needed to meet our operating needs through at least August 10, 2022.

We also believe that our strong portfolio of intellectual property and our solid brand equity in the market will enable us to raise additional capital if and when needed to meet our short and long-term financing needs;

3 unchanged sentences

The following table disaggregates the Company’s revenue into primary product groups:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Audio conferencing

1 unchanged sentence

The following table disaggregates the Company’s revenue into major regions:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

North and South America

Asia (including Middle East) and Australia

Asia Pacific (includes Middle East, India and Australia)

Europe and Africa

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Earnings (Loss) Per Share

Earnings (loss) per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period.

Stock options are considered to be potential common stock.

Loss Per Share

Loss per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period.

Stock options, warrants and convertible portion of senior convertible notes are considered to be potential common stock.

The computation of diluted earnings (loss) per share does not assume exercise or conversion of securities that would have an anti-dilutive effect.

2 unchanged sentences

The following table sets forth the computation of basic and diluted earnings (loss) per common share:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Basic weighted average shares outstanding

5 unchanged sentences

Anti-dilutive options, warrants and convertible portion of senior convertible notes not included in the computation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

4 unchanged sentences

Dividend and interest income are recognized when earned.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of securities at June 30, 2021 and December 31, 2020 were as follows:

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of securities at September 30, 2021 and December 31, 2020 were as follows:

Amortized cost

2 unchanged sentences

Estimated fair value

June 30, 2021

September 30, 2021

Available-for-sale securities:

7 unchanged sentences

Total available-for-sale securities

Maturities of marketable securities classified as available-for-sale securities were as follows at June 30, 2021:

Maturities of marketable securities classified as available-for-sale securities were as follows at September 30, 2021:

Amortized cost

4 unchanged sentences

Total available-for-sale securities

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Debt securities in an unrealized loss position as of June 30, 2021 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality.

Debt securities in an unrealized loss position as of September 30, 2021 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality.

Management believes that it is more likely than not that the securities will receive a full recovery of par value, although there can be no assurance that such recovery will occur.

There were no available-for-sale marketable securities with gross unrealized loss position.

There were no available-for-sale marketable securities with gross unrealized loss positions.

Intangible Assets

Intangible assets as of June 30, 2021 and December 31, 2020 consisted of the following:

Intangible assets as of September 30, 2021 and December 31, 2020 consisted of the following:

Estimated useful lives (years)

June 30, 2021

September 30, 2021

December 31, 2020

4 unchanged sentences

Total intangible assets, net

The amortization of intangible assets for the three months ended June 30, 2021 and 2020 was as follows:

Three months ended June 30,

Six months ended June 30,

The amortization of intangible assets for the three months ended September 30, 2021 and 2020 was as follows:

Three months ended September 30,

Nine months ended September 30,

Amortization of intangible assets

2 unchanged sentences

2021 (Remainder)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Inventories, net of reserves, as of June 30, 2021 and December 31, 2020 consisted of the following:

June 30, 2021

Inventories, net of reserves, as of September 30, 2021 and December 31, 2020 consisted of the following:

September 30, 2021

December 31, 2020

5 unchanged sentences

We expect to sell the above inventory, net of reserves, at or above the stated cost and believe that no loss will be incurred on its sale, although there can be no assurance of the timing or amount of any sales.

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory for the three and six months ended June 30, 2021 and 2020 was as follows:

Three months ended June 30,

Six months ended June 30,

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory for the three and nine months ended September 30, 2021 and 2020 was as follows:

Three months ended September 30,

Nine months ended September 30,

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory

Rent expense is recognized on a straight-line basis over the period of the lease taking into account future rent escalation and holiday periods.

Rent expense for the three and six months ended June 30, 2021 and 2020 was as follows:

Three months ended June 30,

Six months ended June 30,

Rent expense for the three and nine months ended September 30, 2021 and 2020 was as follows:

Three months ended September 30,

Nine months ended September 30,

W e occup y a 1,350 square-foot facility in Gainesville, Florida under the terms of an operating lease expiring in F ebruary 2023 .

4 unchanged sentences

This facility support s our sales, marketing, customer support, and research and development activities.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

5 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Six months ended June 30,

Nine months ended September 30,

Cash paid for amounts included in the measurement of lease liabilities

3 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

June 30, 2021

September 30, 2021

December 31, 2020

5 unchanged sentences

Weighted average discount rate for operating leases

The following represents maturities of operating lease liabilities as of June 30, 2021:

The following represents maturities of operating lease liabilities as of September 30, 2021:

Years ending December 31,

2 unchanged sentences

Imputed interest

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Shareholders' Equity

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Common stock and additional paid-in capital

Balance, beginning of period

Issuance of common stock and warrants, net

Share-based compensation expense

10 unchanged sentences

Total shareholders' equity

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Issue of Common Stock and Warrants

On September 13, 2020, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company issued and sold in a registered direct offering 2,116,050 shares of the Company's common stock, par value $ 0.001 per share at an offering price of $ 2.4925 per share.

The Company received gross proceeds of approximately $ 5,275 and net proceeds $ 4,764 after deducting placement agent fees and related offering expenses.

In a concurring private placement, the Company also issued to the same purchasers warrants exercisable for an aggregate of 1,058,025 shares of common stock at an exercise price of $ 2.43 per share.

Each warrant became immediately exercisable and will expire five years from the issuance date.

On September 12, 2021, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company issued 3,623,189 shares of the Company's common stock, par value $ 0.001 per share at an offering price of $ 2.76 per share.

The Company received gross proceeds of approximately $ 10,000 and net proceeds of $ 9,288 after deducting placement agent fees and related offering expenses.

In a concurring private placement the Company also issued to the same purchasers warrants exercisable for an aggregate of 3,623,189 shares of common stock at an exercise price of $ 2.76 per share.

Each warrant became immediately exercisable and will expire on March 15, 2027.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

Long-Term Debt

Senior Convertible Notes and Warrants

27 unchanged sentences

The following table represents the carrying value of Notes and Warrants:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

June 30, 2021

September 30, 2021

December 31, 2020

10 unchanged sentences

Debt discount and issuance costs are amortized over the life of the note to interest expense using the effective interest method.

During the three and six months ended June 30, 2021, amortization of debt discount and issuance costs was $ 49 and $ 98 , respectively and for the three and six months ended June 30, 2020, amortization of debt discount and issuance costs was $ 49 and $ 98 , respectively.

The following table represents schedule of maturities of principal amount contained in the Notes as of June 30, 2021:

During the three and nine months ended September 30, 2021, amortization of debt discount and issuance costs was $ 49 and $ 147 , respectively and for the three and nine months ended September 30, 2020, amortization of debt discount and issuance costs was $ 50 and $ 148 , respectively.

The following table represents schedule of maturities of principal amount contained in the Notes as of September 30, 2021:

Year ending December 31,

2 unchanged sentences

Total principal amount

Short-term Bridge Loan

On July 2, 2021, the Company obtained a bridge loan in the principal amount of $ 2,000 from Edward D.

Bagley (the “Bridge Loan”), an affiliate of the C ompany.

The Bridge Loan is evidenced by a promissory note dated July 2, 2021 (the “Note”) issued by the Company to Mr.

The Note bears interests at a rate of 8.0 % per annum, matures on the earlier to occur of (i) October 1 , 2021 or (ii) within two business days of the Company’s receipt of its expected U.S.

federal income tax refund, and contains other customary covenants and even ts of default .

On September 11, 2021, the Company amended and restated the terms of the Bridge Loan to extend the latest maturity date from October 1, 2021 to January 3, 2022 .

All other terms and conditions of the Bridge Loan remained the same.

This Bridge Loan of $ 2,000 is included under short-term debt.

Paycheck Protection Program Loan

7 unchanged sentences

The Company intends to use the entire PPP Loan amount for qualifying expenses and to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act.

June 30, 2021

September 30, 2021

December 31, 2020

2 unchanged sentences

Liability component total

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

12 unchanged sentences

The Company’s financial instruments are valued using observable inputs.

The following table sets forth the fair value of the financial instruments re-measured by the Company as of June 30, 2021 and December 31, 2020:

June 30, 2021

The following table sets forth the fair value of the financial instruments re-measured by the Company as of September 30, 2021 and December 31, 2020:

September 30, 2021

Corporate bonds and notes

5 unchanged sentences

The valuation allowance was recorded as we concluded that it was more likely than not that our deferred tax assets were not realizable primarily due to the Company's recent pre-tax losses.

Provision for income taxes for the six months ended June 30, 2021 represents income tax expense recorded for jurisdictions outside the United States.

Provision for income taxes for the nine months ended September 30, 2021 represents income tax expense recorded for jurisdictions outside the United States.

Subsequent events

On July 2, 2021, the Company obtained a bridge loan in the principal amount of $ 2,000,000 from Edward D.

Bagley (the “Bridge Loan”).

Bagley is an affiliate of the C ompany and i s the beneficial owner of approximately 46.7 % of the Company’s issued and outstanding shares of c ommon s tock.

The Bridge Loan is evidenced by a promissory note dated July 2, 2021 (the “Note”) issued by the Company to Mr.

The Note bears interests at a rate of 8.0 % per annum, matures on the earlier to occur of (i) October 1 , 2021 or (ii) within two business days of the Company’s receipt of its expected U.S.

federal income tax refund, and contains other customary covenants and even ts of default .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements